Paying College Athletes/Letting Them Get Endorsements

[The Human Q-Tip]

My opinion (I'm no lawyer) is that without a contractual agreement, student athletes cannot be considered employees. They tried out for the team voluntarily and were selected for it, with no a priori payment agreement. That is the nature of amateur athletics and extracurricular sports.

Most ordinary employees are employed "at-will", with no written contract. So obviously, the law doesn't require a written contract before considering someone an "employee". I suppose some student athletes might argue that a scholarship is more of a written contract than most people have, so that alone should be enough to have them considered "employees".

It's odd that so many pundits, etc., keep assuming this debate only concerns net-revenue producing sports like football and basketball. Under the law, whether employer is profitable or not is irrelevant to the determination of whether or not someone is an employee. There's pretty much no way outside of Congress itself drawing a rather weird line that the "employee" determination can be limited only to certain sports.

 

[AZ_]

but courts aren't permitting that so it is pretty much out of the NCAA's hands at this point

And the counter-argument is that they can 100% ignore this and create an agreement with the athletes, universities and their other stakeholders.


One which is legally defensible — even if it means some uncharted territory for the NCAA model.

They can save themselves, or be killed. And it couldn’t happen to a better entity.

 

[jjvors]

Most ordinary employees are employed "at-will", with no written contract. So obviously, the law doesn't require a written contract before considering someone an "employee". I suppose some student athletes might argue that a scholarship is more of a written contract than most people have, so that alone should be enough to have them considered "employees".

It's odd that so many pundits, etc., keep assuming this debate only concerns net-revenue producing sports like football and basketball. Under the law, whether employer is profitable or not is irrelevant to the determination of whether or not someone is an employee. There's pretty much no way outside of Congress itself drawing a rather weird line that the "employee" determination can be limited only to certain sports.

Right. I never saw a scholarship as a payment to the student as income would be. Rather, it's a discount in tuition cost. I had both a full tuition and half tuition scholarships in my 4-year undergraduate career.

Certainly, some in the federal government may want to consider scholarships as income--that'll give the government more income to tax. But as an accounting student and an MBA, that's a cost discount, not income received.

 

[The Human Q-Tip]

Right. I never saw a scholarship as a payment to the student as income would be. Rather, it's a discount in tuition cost. I had both a full tuition and half tuition scholarships in my 4-year undergraduate career.

Certainly, some in the federal government may want to consider scholarships as income--that'll give the government more income to tax. But as an accounting student and an MBA, that's a cost discount, not income received.

Agreed. But that's the argument they're making, some some judges will buy it. The question is how you have a national system when different schools are governed by such different legal rules.

 

[The Human Q-Tip]

And the counter-argument is that they can 100% ignore this

How do they just ignore a court order saying they cannot abide by that agreement without triggering massive court penalties?

and create an agreement with the athletes, universities and their other stakeholders.

The NCAA cannot force every single athlete to sign such an agreement, and cannot prevent itself from being sued by either 1) those individual athletes who don't like the agreement, or 2) schools that violate that agreement and sue to avoid punishment, which is exactly what actually happened.

So sure, the NCAA can create an agreement. It just won't do them any good because it won't be binding on all the necessary parties. And if they try to strongarm schools or athletes into agreeing, that is an open and shut violation of antitrust law.

The only possibility of doing that is if all the athletes were declared employees, formed a union, got a majority of athletes to join that union, and then negotiated a CBA that permitted the NCAA to engage in actions that would otherwise constitute illegal restraints of trade. But then declaring all those athletes to be employees obviously has its own drawbacks - tax and otherwise - even for the athletes.

Further, just declaring all those athletes to be employees likely wouldn't even work. A great many student athletes probably would not want to be considered employees, would challenge the certification of the bargaining unit, and likely win in at least some circuits. I've seen some people out there urging schools to "just make them all employees" but you can't just proclaim that and have it actually be legally effective.

Now, if the NCAA and major colleges came to an agreement like you described, and then Congress passed a law codifying that such agreements do not violate antitrust law or include the drawbacks of being declared "employees", that could work.

Other than that, there is no way to make it binding and enforcement on everyone.

 

[2 For The Brew]

Right. I never saw a scholarship as a payment to the student as income would be. Rather, it's a discount in tuition cost. I had both a full tuition and half tuition scholarships in my 4-year undergraduate career.

Certainly, some in the federal government may want to consider scholarships as income--that'll give the government more income to tax. But as an accounting student and an MBA, that's a cost discount, not income received.

Under IRS regulations scholarships are considered income under certain circumstances. Anything not directly related to education is gross income and must be reported as such on your 1040. So money for room and board as well as a “stipend” is taxable income.

Accounting / MBA / GAAP / FASB / GASB are not relevant. Taxable income is governed by tax law including statutes, regulations, revenue rulings and tax court decisions.

NIL money is definitely taxable income.

 

[AZ_]

How do they just ignore a court order saying they cannot abide by that agreement without triggering massive court penalties?


The NCAA cannot force every single athlete to sign such an agreement, and cannot prevent itself from being sued by either 1) those individual athletes who don't like the agreement, or 2) schools that violate that agreement and sue to avoid punishment, which is exactly what actually happened.

So sure, the NCAA can create an agreement. It just won't do them any good because it won't be binding on all the necessary parties. And if they try to strongarm schools or athletes into agreeing, that is an open and shut violation of antitrust law.

The only possibility of doing that is if all the athletes were declared employees, formed a union, got a majority of athletes to join that union, and then negotiated a CBA that permitted the NCAA to engage in actions that would otherwise constitute illegal restraints of trade. But then declaring all those athletes to be employees obviously has its own drawbacks - tax and otherwise - even for the athletes.

Further, just declaring all those athletes to be employees likely wouldn't even work. A great many student athletes probably would not want to be considered employees, would challenge the certification of the bargaining unit, and likely win in at least some circuits. I've seen some people out there urging schools to "just make them all employees" but you can't just proclaim that and have it actually be legally effective.

Now, if the NCAA and major colleges came to an agreement like you described, and then Congress passed a law codifying that such agreements do not violate antitrust law or include the drawbacks of being declared "employees", that could work.

Other than that, there is no way to make it binding and enforcement on everyone.

The NCAA currently makes every single athlete sign a legally binding agreement.

 

[The Human Q-Tip]

The NCAA currently makes every single athlete sign a legally binding agreement.

If that is the case, then it's probably one reason why they're losing antitrust cases. As I said in the post to which you are responding:

And if they try to strongarm schools or athletes into agreeing, that is an open and shut violation of antitrust law.

Look, it is really basic labor law that things that are normally considered violations of antitrust law can be legal if part of a collective bargaining agreement with a union. That's why the NFL, MLB, and NBA can get away with some of the "anticompetitive" stuff they do, and why those unions threatening to decertify is such a weapon.

The problem is that to have a union, the student athletes must be considered employees in the first place, which as we've all noted is something that has a lot of drawbacks for the athletes themselves.

By the way, I think it's probably worth noting that those professional players unions haven't decertified as a way to break the power of those leagues. And that's because they recognize that a system that maintains some level of competitive balance ultimately helps them as well.

But because of recent court decisions, colleges and the NCAA are now sliding into the world that would exist for the pros if the antitrust exemptions accompanying having unions didn't exist. And that's an environment those professional players are smart enough to know wouldn't benefit them.

 

[jjvors]

Under IRS regulations scholarships are considered income under certain circumstances. Anything not directly related to education is gross income and must be reported as such on your 1040. So money for room and board as well as a “stipend” is taxable income.

Accounting / MBA / GAAP / FASB / GASB are not relevant. Taxable income is governed by tax law including statutes, regulations, revenue rulings and tax court decisions.

NIL money is definitely taxable income.

I think I can live with 'stipends' being treated as income. That means money is received, which is income. Same thing with money for room and board.

My specific objection is treating a scholarship as income, which means the cost of education is reduced. That is not income received.

I realize the difference between normal accounting standards and taxing standards. My accounting instructor, after the first semester, taught tax accounting the second semester. The first day of the second semester he said, 'Forget everything I taught you in the first semester.'.

 

[jjvors]

Agreed. But that's the argument they're making, some some judges will buy it. The question is how you have a national system when different schools are governed by such different legal rules.

There are two questions here: what is income is to be taxed and how should student athletes be treated by colleges? The first question is clear and is nationwide: income is money received, local court ruling notwithstanding. That issue will be appealed to the Supreme Court until the definition is clear.

I have no problem with different colleges treating student athletes differently. The only national organization that cares about that is the NCAA, which is trying to preserve amateur status of its members. That levels the playing field between colleges and individuals.

Forcing colleges to pay student athletes, as California seems to suggest, is a good way to end collegiate athletics. Most colleges can't afford it, so they'll end their programs.

Allowing some colleges to pay their student athletes will lead to a two-tier system: those who pay their athletes and those who don't. The colleges then become a minor league system for major sports.

I don't see any other outcome.

 

[The Human Q-Tip]

I have no problem with different colleges treating student athletes differently. The only national organization that cares about that is the NCAA, which is trying to preserve amateur status of its members. That levels the playing field between colleges and individuals.

I do think some of the schools themselves care. There's also the issue of what are rules when a team organized under the rules of one state plays in another state that has different laws. If California requires payment, workers comp, etc., that likely would apply to any out of state team playing a game in California.

Allowing some colleges to pay their student athletes will lead to a two-tier system: those who pay their athletes and those who don't. The colleges then become a minor league system for major sports.

I don't see any other outcome.

I agree. I don't think the tiers will be bright-line, but they'll exist in a general sense.

Forcing colleges to pay student athletes, as California seems to suggest, is a good way to end collegiate athletics. Most colleges can't afford it, so they'll end their programs.

There already is some tension between academics and athletic departments at the vast majority of schools whose athletic departments run "in the red". Can't imagine that is going to improve if athletic departments start requiring even greater subsidies, and in an environment where schools more schools are having funding issues already.

 

[AZ_]

North Carolina tennis player files suit challenging NCAA's rule that prevents players from winning prize money

Alabama golfer Nick Dunlap won a PGA Tour event in February as an amateur but was unable to collect the first-place prize money.

sports.yahoo.com

Rectifying this with an agreement between the NCAA and schools would help them establish a basis for a "legally defensible" business model.

If an athlete wins, they must give up potentially life-changing money to maintain amateur status.

No common sense, and nobody wins.

 

[The Human Q-Tip]

http://-132734451.html

Rectifying this with an agreement between the NCAA and schools would help them establish a basis for a "legally defensible" business model.

If an athlete wins, they must give up potentially life-changing money to maintain amateur status.

As agreement between the NCAA and schools wouldn't prevent lawsuits by students. The only thing that would prevent/insulate them from lawsuits by students is to lift all restrictions on outside income, which they should do immediately because at least some courts are heading in that direction anyway, and there really isn't any way to stop them.

The only other thing that comes to mind is 1) requiring reporting of outside income, and 2) deducting the amount received from outside competition from the amount of any scholarship award.

 

[AZ_]

 

[The Human Q-Tip]

Is he saying direct payments will replace NiL? Because I don't see that happening pretty much ever. It's a completely different source of funding, and despite goofy Nick Saban thinking that NiL revenue should be shared among different teams, it will remain the way for boosters to attract players to their own school. No way boosters are going to contribute to NiL if that money is going to teams other than their own.

There are some huge issues with direct payments over and above scholarships/stipends - not to mention Title IX implications - but I suppose we'll see. I'm skeptical that schools will do it to a significant degree because of the cost/internal politics at schools. Most academic leadership/deans are not going to want to spend more general university money to pay student athletes, nor should they. So that means it most likely would be limited to the dozen or so schools whose athletic department are in the black and that can therefore self-finance the payments.